EMATIC STUD 
»F SHIPPING 



BLVIN S. KETCHUM, A.B.. Pd.M. 

II.. I Ml SHIPPERS' PRBICHT SERVICE 



TA|iA];ii:gt|WmIl^ni^^ 




Class H FS 7(^l 

Book - H ^ 

Copyright 1^° 



COPYRIGHT DEPOSIT. 



THE SYSTEMATIC STUDY 
OF SHIPPING 



ELVIN S. KETGHUM, A.B., Pd.M. 

Director. THE SHIPPERS* FREIGHT SERVICE 



CHICAGO 

De Bower«Ghapline Co, 

PUBLISHERS OF UNIVERSITY TEXT BOOKS 






Copyright, 1909 
By DEBOWER-CHAPLINE GO. 



©CI.A251431 



THE SYSTEMATIC STUDY 
OF SHIPPING 

By ELVIN S. KETCHUM, A. B., Pd. M. 

This lesson discusses conditions which make two freight 
rates possible for the same goods; intent of Interstate Com- 
merce Act; survey of course; why shippers lose freight money; 
how shippers may secure lowest rates; why trained traffic men 
are indispensable; duties of Traffic Managers. 



All business is practically divided into four kinds of activ- 
ity. Man cannot create matter; but he may change Ws form, 
move it from one place to another, preserve it for a period of 
time or sell it, changing the property right. Coal in the 
strata of the earth is practically worthless. After the miner 
has tunneled into the vein, broken down the coal, loaded it 
on the car, and delivered it to the tipple, it is worth 50 cents to 
$1.00 a ton. That same coal in some parts of the country is 
worth ;^io.oo to ^12.00 per ton. What has caused the advance 
in price ? It is the same coal in the same form. The only 
difference is that its location in relation to market has been 
changed. This is what the economists call a ''place utility." 
The agency which produces a place utility is transportation 
and it is a fixed value in the cost of all manufactured goods and 
every article of commerce. 

The business man must consider three things in deter- 
mining his profits. The cost of production on 'Torm utility," 
the cost of marketing his goods or '^possession utility" and the 
cost of distribution, or "place utility/' The cost of distribu^ 
tion or freight charges is today one of the most uncertain costs 
in estimating profits and one of the most important because it 
determines the selling price. It is logical to predict that most 



2 THE SYSTEMATIC STUDY 

manufacturers can produce the same quality of goods at about 
the same price, but if one of them gets a lower cost of distri- 
bution through lower freight charges, he has excellent chances 
of putting his competitors out of business. Most every trust 
concern today is an example of the application of minimum 
freight charges in crushing competitors. This is why the 
master of freight rates is the master of markets, and the reason 
some concerns can afford to pay TraiKic Experts who know 
every angle of the Freight Traffic business, salaries ranging 
from $5,000 to ^25,000 per year. 

The conditions which, in many cases, produce two freight 
rates for the same goods, are those which existed before the 
Interstate Commerce Act was passed, conditions which the 
passage of the Act did not alter or change in any particular, 
and conditions which confront practically every railroad and 
shipper in the country at the present time. Plainly stated, 
these conditions are the demands of special interests and 
communities for lower rates for their shipments than are 
applied to the shipments of the public at large. 

It has, from time immemorial, been accepted as an eco- 
nomic law of trade that the man who purchased a large quan- 
tity was entitled to a lower price than the man who purchased 
a smaller quantity. This sentiment is one which is deep- 
rooted in the minds of the business public, and it is necessary 
for railroads in making rates for the transportation of freight 
to recognize this sentiment, the statute regulating interstate 
commerce to the contrary notwithstanding. It is in the man- 
ner which has been adopted by the railroads to meet this 
demand of the shipping public, and at the same time con- 
form to the letter of the law, that the average shipper finds 
opportunity to secure for himself lower freight rates than 
would otherwise be applied to his traffic. 

1 he methods and practices of railroads that have been in 
effect for years were completely overturned by the act regu- 
lating commerce. According to the publication and post- 
ing clause of the new act, it was made illegal to offer any rate 



OF SHIPPING 3 

which was not previously published and posted for the benefit 
of all shippers. Prior to the advent of the Interstate Commerce 
Act very few tariffs were published. Each line published 
local tariffs showing rates between stations on their lines and 
through rates to a few of the larger jobbing centers without 
regard to how these through rates affected intermediate points 
where rates were arbitrarily made with no reference to their 
proportionate mileage of the through haul. Special rates were 
issued by circular and not published at all, and contracts for 
drawbacks and rebates were made without the knowledge of 
anyone but the parties interested and the clerks in charge of 
the rebate claim department. 

It was a hard matter for railroads to adjust themselves to 
the new conditions imposed. Rates had been made upon the 
basis of "what the traffic would bear." Into this entered as 
factors the question of competition and the building up of 
industries along the line of the railroad which would ulti- 
mately produce increased traffic, and, as in every other business 
enterprise, the volume was the determining factor in making 
the rate. There was, prior to the enactment of the law regu- 
lating interstate commerce, no long and short haul clause acts 
as a deterrent factor in the making of rates. The shipping 
public were dealt with in the same way and upon the same 
general principles that governed in other lines of business 
enterprise. The rule was, get the business. Get it at a profit 
if you can, but get it. 

If it appeared, for example, that a certain lumber shipper 
could make a contract involving the sale of a great many cars 
of lumber at a certain point providing he could sell at a certain 
price, he and the railroad representatives on whose line he was 
situated would get together and arrange for a rate that would 
enable the lumber dealer to get the business and the railroad 
to get a haul at a profit, even if it were small. Each road had 
certain prorating arrangements with their connections whereby 
they were at liberty to make what rates they felt necessary to 
secure certain traffic, provided, of course, that the earnings 



4 THE SYSTEMATIC^STUDY 

did not fall below a certain minimum for each line. In cases 
of competitive business and at times when traffic was light, 
even better terms than these were made. 

Such a rate was called a special rate, issued in the interest 
of a certain firm on a definite article traveling between defined 
territories. If, in the making of such a special rate, it was 
found that it was lower than a special offered to some other 
concern shipping the same commodity from the same point, 
there might be trouble if it came to the knowledge of the other 
party, so the shipments were billed at the same special rate 
as already in effect, and a rebate or drawback was given to take 
care of the difference. 

This was the situation in deaitn^ witk- large traffic in 
carload lots. The same condition pertained to large shippers 
of less than car lots, but it had to be dealt with in a different 
manner in many cases. Suppose in the same town there were 
two large concerns, the one larger than the other, receiving or 
shipping large quantities of merchandise freight, as it is called, 
or less than car lots. To issue special rates to cover the var- 
ious articles they receive from various points or to do the same 
for shipments to all points of the compass was an impracti- 
cability. In these cases, to secure the business and insure 
getting all of it, one line would offer a rebate of a certain per- 
centage on all freight bills paid when coming from territory 
where they had pro-rating arrangements, and the amount of 
rebate or drawback would be regulated by the volume of 
traffic and the amount of freight paid. 

There was nothing criminal about this. It was a common 
law of business as applied to every other commercial enter- 
prise, and there was nothing peculiar in the fact that the rail- 
roads of the country recognized that the buyer of a large 
quantity of transportation was entitled to a lower rate than the 
buyer of a small quantity. It is an economic fact that large 
quantities can be handled at a lower price proportionately 
than smaller quantities, and this was the rule which regulated 
the making of special concessions of every character before 
the establishment of the Interstate Commerce Act. 



OF SHIPPING 5 

Here is the basis of the whole study of traffic. Here we 
come up with the things which makes study of the traffic 
situation profitable. Here is where the transportation interests 
of the country must meet the Federal laws. Here is where, 
for a time at least, they fell down and here is where, in studying 
how they finally readjusted themselves to the situation, you 
get the knowledge of how to save money on freight shipments. 

The one purpose of a railroad is the production of profit. 
That is where it is like everything else in the way of business 
enterprise. But in the carrying out of its purpose its func- 
tions are different from those of other business ventures. It 
meets with and has to deal with more perplexing problems 
than others. Part of these arise from its desire to increase 
its traffic. Some of them arise from competition and some from 
the fact that it is what is termed in law a common carrier, i. e., 
it is obliged to receive freight for shipment and cannot decline 
it at its option. 

In its desire to create traffic, the railroad has done 
more for the upbuilding of the country than perhaps all 
other factors combined. They stimulate the building 
of industries along their lines to the end that it may 
thereby increase traffic. In making rates for these arid 
other large interests which are or may be located along its 
right of wa)^ or in the towns on the line of its railroad, it has 
to consider the fact that if it can, through the establishment 
of low rates, enable the shippers along its line to increase 
their business it creates a two-fold benefit; it builds up the 
business of its patrons and at the same time it prevents the 
business and the traffic from going elsewhere, thus increasing 
the earnings of the railroad. This is not purely a selfish 
business proposition, as it sometimes has to be done with no 
profit for the time being, or at a very slight profit. 

The great aim of every railroad is to have full train loads 
both going and coming, and in the newer sections of the 
country and because of conditions which we cannot enter into 
here, this is a problem, and a problem which is productive of 
competition and the cutting of rates. 



6 THE SYSTEMATIC STUDY 

As a common carrier it cannot carry on its plans with the 
same freedom of movement that is possible to other forms of 
business enterprise, and this is because it is a quasi-public 
corporation, gaining its charter from the various states and 
often various and sundry other rights, which become valuable 
on the theory that a railroad is put into commission to serve 
the people and build up the business interests of the country. 

It is as a common carrier that the Interstate Commerce 
Act deals with the railroads, and in placing all shippers on 
the same plane for the transportation of all their freight, the 
law has placed an obstacle in the way of the railroads, which, 
with all their planning, they cannot wholly get around. It is 
in the publication of tariffs, for the benefit of the shipping 
public, that they have struck the hardest snag, and it is because 
they cannot prevent conflict of rates in the issuance of tariff^s, 
that the study of traffic becomes one of profit and value to the 
average shipper. 

Experiences, however, show that the conditions which ex- 
isted before the enactment of the Interstate Commerce Act 
still exist, and that these conditions are such that the rail- 
roads must meet them by the issuance of special rates with 
this difference, that now the methods of their issuance is 
changed to conform to the law. Naturally, if the railroads 
were at such pains to keep them from the eyes of the general 
public when they were not by law compelled to offer one 
shipper the same rate as the other, they will be at no less pains 
in their issuance at this time when it is possible for anyone to 
take advantage of these special concessions and secure such 
benefits for themselves as are intended to apply to the ship- 
ments of others. 

These are some of the many conditions which make the 
systematic study of shipping necessary. Few people realize 
the importance of the cost of distribution. Transportation is 
the largest single item of expense in the world. It costs over 
two thousand million dollars annually. This is over $2$ 
for every man, woman and child in the United States. It is 



OF SHIPPING 7 

10 per cent of the value of all manufactured articles. It is 
five times the surplus and capital of all the National Banks in 
this country. No nation or corporation on earth spends in a 
single year a sum which compares with it. Freight dis- 
crimination is one of the foundations of trust. Yet it is 
claimed that 90 per cent of all of this money is spent by 
shippers who do not know whether they are being charged 
correctly or not. Conservative traffic experts estimate that 
shippers lose ^^50,000,000 to ^100,000,000 annually in over- 
charges and errors. This vast amount of money is earned by 
one set of men merely because the other set of men lack the 
information which could save it. 

The number of tariffs, rulings and regulations pertaining 
to the shipment of goods filed every day represent about 600 
pages of printed matter of the size of a regular letter-head. 
The time has come when it is absolutely necessary for shippers 
to learn the difi^erence between the **net price" and the "list 
price" for shipping goods. It is a common fault of shippers, 
whose attention every now and then is directed to errors in 
shipping which produce overcharges and often cause them to 
lose sales — to lay the blame at the door of the carriers. It is 
a wrong assumption to place upon the sellers the responsi- 
bility of looking after the interests of the buyer. Yet that is 
precisely what a great many shippers do when buying trans- 
portation. The railroads are selling, the shippers buying 
transportation, and it is the business of the shipper to look after 
his own end of the trade. 

The systematic study of the science of shipping is indis- 
pensable and it opens up a new field of business endeavor 
both profitable and full of opportunity. It is a field in which 
the demand for trained men is greater than the supply and one 
which has hitherto been closed to the average man except 
through long and tedious apprenticeship. It is a subject 
which may be reduced to concrete form in a series of Techni- 
cal Lessons, Lectures and Text Books. These principles which 
govern the handling of freight traffic and through which a 



8 THE SYSTEMATIC STUDY 

saving in freight charges is produced supply a want, created 
by the Interstate Commerce Act, which has been felt by every 
shipper and every clerk identified with shipping details 
throughout the country. 

The position of Traffic Manager, or expert, for shipping 
concerns, is one that pays well and commands respect. The 
man who occupies this position is thrown into close contact 
with his employer, as the development of new territory, the 
meeting of competition and the making of sales often depends 
upon his knowledge and ability to make them possible. In 
the hands of men of ability, this technical information is the 
stepping stone to positions of even greater responsibility and 
profit, as the traffic and sales departments are closely allied. 
Better, hov/ever, than anything else which may be said to the 
young man entering upon this field of work, is the fact that 
everyone who masters this information from the very outset 
is put upon a higher plane than the ordinary beginner in 
commercial service, and commands the pay of a trained man. 

Aside from the demand for trained traffic men in private 
service, there is a wide field among railroads for men who 
command the knowledge requisite to the quoting rates to all 
points in the country. Rate clerks get better pay than the 
average of railroad employes, and there is a constant demand 
for competent men. The shipping clerk or other employee 
connected with the details of freight shipping, who wishes to 
advance himself and earn more salary, is given an opportunity 
fully as great. It will open to these an avenue of escape from 
the drudgery of mere manual labor and enable them to com- 
mand through increased knowledge, positions of greater re- 
sponsibility. 

In pursuing this study, therefore, the student should bear 
in mind the importance of the work, and seek to apply the 
principles to the immediate needs of his business. A careful 
study of the Interstate Commerce Law will be made with its 
applications. This will be correlated with the regulations and 
rulings of the Interstate Commerce Commission, together 



OF SHIPPING 9 

with the decisions of the courts under the Federal Act. The 
Technical Lessons will take up a thorough study of the classi- 
fication territories with the application of rates in each of them. 

In computing the lowest freight rate a thorough knowledge 
of the geographical locations is of paramount value. The 
country, for the purpose of rate making, is divided into terri- 
tories and then again sub-divided many times. Within these 
territories are what are known as "common points," which 
serve as a basis from which rates are figured to towns within 
a certain radius, and these rates to common points are used as 
maxima. 

There are three general divisions of the country for this 
purpose, named after the classifications which govern on 
traffic within their boundaries. They are Official Classifi- 
cation territory. Southern Classification territory and Western 
Classification territory. These are again sub-divided and 
various portions put under the control of Committees and 
Associations, composed of representatives of the railroads 
operating within these territories, and these Associations and 
Committees in turn determine how rates shall be made and 
what towns shall be used as points on which to base rates. 

We give here a rough outline of the divisions of the country 
so divided, which is not complete in all details, but will serve 
as a guide to give the student an idea of part of the plan which, 
while seeking to simplify rate making for railroad usage and to 
establish a common basis for rate computation which will be 
acceptable to all lines interested, really complicates the situation 
for the understanding of the average shipper. 

The Official Classification territory has two general divi- 
sions called the Trunk Line territory and Central Traffic 
Association territory. The first extends its boundaries from 
the Atlantic seaboard to the Niagara frontier, or what is known 
as the western terminal of Trunk Line territory, and the latter 
extends from Chicago east to the same boundary. The divid- 
ing line is fixed by the gateways known as the Niagara frontier, 
which are Buffalo, Black Rock, Erie, Salamanca, Pittsburg, 



10 THE SYSTEMATIC STUDY 

Parkersburg, W. Va., and Wheeling. Rates east and west- 
bound within these territories are established upon a percentage 
basis, the foundation being the New York-Chicago rate, 
which is 100 per cent. All other rates within this territory east 
and west are determined upon their relative mileage to the 
terminal points, New York and Chicago. Rates from Trunk 
Line territory south-bound are based upon what are known as 
the Virginia Cities, i. e., Richmond, Petersburg, Lynchburg 
and Norfolk, Va., and in some instances upon the Ohio River 
crossings. 

Rates from Central Traffic Association territory east- 
bound are based upon the Chicago-New York rates, and the 
seaboard towns, Boston, Philadelphia and Baltimore, are 
figured at fixed difi^erentials, higher or lower than New York. 
Rates south-bound from Central Traffic Association terri- 
tory are governed by the Official to the river, but the Southern 
Classification may be used to Mississippi Valley territory, 
when it makes a lower rate. On south-bound shipments from 
this territory rates are all based on the Ohio River crossings; 
Louisville, St. Louis, East St. Louis, New Albany, Jefferson- 
ville, Cincinnati, Cairo, Thebes, etc., and to some few points 
on Virginia City combinations. 

Southern Classification territory has within it the South- 
eastern Freight Association, Southeastern Mississippi Valley 
Association, The Joint S. E. M. V. Association and S. E. F. 
Association, the Associated Railways of Virginia and Carolina 
and Central Kentucky territory. These divisions are defined 
carefully in our lessons which follow. The various divisions 
of this territory are due to water competition with the Ohio, 
and Mississippi Rivers, and with similar competition existing 
on the Atlantic seaboard and with waterways running inland 
therefrom. 

The basing points to and from this territory are the Ohio 
River crossings, Virginia cities and common points within the 
territories such as New Orleans, etc. Exceptions to the classi- 
fications are named in the article which defines the scope of 
Classification influence. 



OF SHIPPING 11 

Western Classification territory embraces a large number of 
Associations and Committees, the more important of which are 
the Trans-Missouri Freight Committee, Western Trunk Line, 
Southwestern Freight Committee, Trans-Continental Freight 
Bureau, Arkansas Freight Committee, and Indian Territory 
and Oklahoma Conference Committees. 

Basing points to and from this territory are the Mississippi 
and Missouri River points, Minnesota Transfer and common 
points within the territory such as Denver, Spokane, Salt Lake, 
Arkansas and Texas common points, etc. Some common 
points within each of these territories may be used as bases 
for figuring low combinations. 

In making tariffs at the outset the common points in the 
various territories are taken as the maxima and other rates 
based thereupon. After these have been issued for a time 
they become a permanent basis and all other rates are affected 
by their variations. In the issuance of these first tariffs, 
the rates are carefully compiled with due regard to avoiding 
conflict and the long and short haul clause, taking into con- 
sideration all factors such as mileage, competition, etc., and 
these tariffs then become recognized figures for transportation 
cost. Such tariffs are broad and comprehensive, cover all 
towns, all classes and general commodities, and are the founda- 
tion of railroad charges billed against freight carrying. 

Railroad clerks use them and the public get them for the 
computing of freight cost, and in this matter — "list" price 
becomes established for the transportation of freight. Hardly 
are these issued, however, before the demands of competttton^ 
the demands of certain interests for lower rates and such like 
factors compel the issuance of other rates, which tend to lower 
the cost for transporting freight. Frequently these changes 
are made to the common points on special commodities and 
sometimes on classes, and in their issuance the tariff only 
names changes to the basing point, although by so doing all 
rates within a certain radius are affected. Rates beyond and 
intermediate become susceptible of change in consequence, 



12 THE SYSTEMATIC STUDY 

but as the public does not know of this, the old rates are 
charged and an overcharge results, even though it be un- 
known to the shipper. 

This discussion of the classification territory is not very 
clear to the beginner and it is mentioned here just to show 
that a systematic study of the application of rates is necessary 
for the securing of lowest freight charges. A full and com- 
plete description of each of the classification territories with 
all their divisions, and the application of rates in them will 
be taken up in detail later in the course. 

The Interstate Commerce Act, which placed at the disposal 
of the shipper the tariffs and other sources of information as 
to the cost of transportation, was not a railroad measure; in 
fact, it is commonly accepted that the railroads were opposed 
to it. It was a measure enacted for the benefit of the shipper 
of the country. It compelled the railroads to publish their 
rates for the benefit of all, but it also placed upon the shipper 
the responsibility of using the tariffs if he wanted to secure 
the benefits which the law was designed to provide for him. 

Let us consider the results of this publication clause of the 
act regulating Interstate Commerce and we shall understand 
both why the railroads make errors and why it is imperative 
that the shipper look after his own interests in buying trans- 
portation if he desires to secure the lowest rate of freight. 
Most overcharges are due to errors. Most errors are due to 
three things: (i) the common tendency of all employes to 
make mistakes; (2) to the immense amount of detail involved 
in properly billing the charges against freight and in rating 
shipments, and (3) to the want of full and complete files of 
information or adequate time to make use of them. 

The number of tariffs in effect today among the various 
railroads of the country run into millions. The major classi- 
fications embrace 23,000 separate and distinct items, a large 
part of which acquire different classification when differently 
packed and described. The larger part of the tariffs issued 
are called commodity tariffs, being in effect special rates applied 



OF SHIPPING 13 

to special classes of freight. These are issued by the various 
railroads to meet peculiar conditions, which demand lower 
rates for certain industries and individuals producing large 
tonnage, but which are applicable to shipments of any one 
whose freight so travels as to make it possible to take advan- 
tage of them. 

No railroad attempts, nor would it be practicable, to change 
the description of freight or suggest other methods of packing 
it which would produce lower rates, nor does any railroad carry 
a complete file of all the tariffs of all lines, yet this is practically 
what would have to be done if the railroads were to secure to 
the shipper the lowest rate of freight. Often it would mean the 
loss of freight. How unreasonable, then, for the shipper to 
expect it. 

It is a human impossibility for railroad rate clerks to cor- 
rectly quote rates on all the various articles shipped every day 
from any of the large cities to widely distributed territory. 
The bill clerks merely bill charges against freight according 
to the description given by the shipper, and do not attempt 
to figure the lowest rate that may be applied. A shipper on 
a carload of goods was recently overcharged ;^i4i.29 because 
the goods were billed under the wrong classifications. It is 
unreasonable to expect the railroad clerks to look up the lowest 
rates for the shippers. They haven't the time. In asking 
railroad clerks to look after the shipper's interests you are 
asking them to serve two masters — and one of them pays no 
salary. 

What, then, is the remedy } The answer is simple enough. 
Each shipper must look after his own interests. Let us sug- 
gest how it can be done and with economy. The opportunity 
has been afforded through the Interstate Commerce Act. 
When the railroads were compelled to abandon rebates and 
special preferential rates through the enactment of the Inter- 
state Commerce Act, it was not contemplated that this law 
would do away with the conditions which made these rebates 
and special rates necessary, but it was intended that if they 
were re-issued after that act became a law, that they should 



14 THE SYSTEMATIC STUDY 

be in compliance with the law, which gave to every shipper 
the right to take advantage of such rates if his freight traveled 
in a direction which made it possible, and if he knew how to 
secure the "net price." Now here was the opportunity which 
the law created to place all shippers on an equal footing. But 
the means for using it properly were lacking. The law created 
the opportunity, but it could not compel shippers to make use 
of it. Those who did, profited in so doing. Those who did 
not, lost an advantage. 

The new law did away with rebates. It could do away 
with preferential special rates. It could not alter the condi- 
tions which made them necessary. The necessities of certain 
communities, the necessities of certain individuals and of 
particular classes of traffic demanded special recognition at 
the hands of the railroads. The law, however, made it im- 
possible that these concessions should prefer any one shipper 
or community or class of interest above another. All must be 
privileged to take advantage of such special concessions when 
opportunity afforded. 

The wise few realized that the railroads must meet these con- 
ditions and proceeded at once to make use of their privileges. 
They employed traffic experts and paid them good salaries 
to secure such advantages as the publication clause of the law 
afforded. It is significant that the very ones who had profited 
by the rebates, special rates, etc., prior to the enactment of 
the Interstate Commerce Act were the first to profit by the 
provisions above mentioned. Is there no significance in the 
fact that they are still employing experts and paying out 
money that they may profit through their employment } Yet 
the law is strictly conformed to. These shippers possess no 
advantage which is not by right the privilege of every other 
shipper — if they would exercise their right. 

The law created the opportunity. Why did not all ship- 
pers make profitable use of it ? Well, some would not and 
many could not. Those who would not were those who be- 
lieve the passage of a law is a cure for the evils at which it is 



OF SHIPPING 15 

aimed. They forget that laws are but instruments, valueless 
unless used. Those who could not wer^ those who could not 
command the service ot experts, and they are many. Experts 
were scarce. There was no school for their production save 
the slow school of experience. It ground them out slowly and 
the demand soon exceeded the supply. 

We have indicated how errors occur among the railroads. 
It is almost impossible for them to remedy conditions so as to 
prevent them, and the reasons for that are stated, but with the 
shipper it is different. Any railroad rate clerk will tell you 
that if he had charge of but one class of shipment he could 
and would rate them properly with little chance of error. 
This is precisely the conditions facing the shippers and our 
instruction tells him how to do it. 

Each shipper has for classification a limited number of 
articles. He ships to a defined territory, save in a few cases. 
Therefore, it is possible for him to make an exhaustive study 
of the classifications and rates and to maintain a complete 
file of all the tariffs which in any way affect the cost for carrying 
freight — ^if he knows how to do it. It seems a simple thing 
to read the tariffs. It is a complex study requiring knowledge 
of a peculiar kind to study them profitably. The fact that 
errors are made by men whose business it is to be familiar 
with the rate situation is prima facia evidence. The further 
fact that experts are employed to do this work for certain ship- 
pers is complete proof. 

These conditions have created a new department in busi- 
ness known as the Traffic Department. The man in charge 
of this department is known as the Traffic Manager or expert. 
The Traffic Manager for private shippers is, like the Traffic 
Manager for a railroad, a student of transportation conditions. 
The study of freight traffic is made possible by the Interstate 
Commerce Act; it is made necessary by the attitude of the 
carriers of the country towards this Act. The purpose of the 
act regulating interstate commerce was to compel the railroads 
to offer the same facilities and the same rates to all shippers, 



16 THE SYSTEMATIC STUDY 

whether small or great. The attitude of the railroads is antag- 
onistic to this. Their position is very clearly defined by the 
president of a prominent eastern road, who says that there is 
no more justice in regulating the price which the carriers 
should charge than in fixing the price at which one of the mills 
along the line of his road should sell its product. 

This being the position taken by the railroads, it will be 
seen that if there is any way in which they can comply with the 
requirements of the law and at the same time prevent the 
attainment of the ends which it sought to accomplish, they 
would adopt that plan. This explains how in many cases 
there has gradually crept into existence two sets of rates for 
carrying freight, a **list" and a **net" price, the one a high 
rate, the other, a lower one, both published in due form and 
both legal rates. It shows why these two rates, one, the higher, 
is known to every one, while the lower is known to but a few, 
and in doing this it explains how the few secure advantages 
over the many without securing rebates or any concession to 
which all are not entitled. It explains how this can be done 
without conflicting with the law, yet in a manner that per- 
cludes most shippers from securing the very benefits which the 
framers of the law hoped to assure to them. It explains why 
almost every shipper (at least go per cent of all) are at some 
time and in some way losing money through errors which a 
careful study and understanding of the traffic situation would 
correct; losses which it is not always possible and which at no 
time is it the business of the railroads to prevent. 

The systematic study of these conditions is of positive and 
real benefit to every shipper and it shows that the vital weakness 
of the Interstate Commerce Act, so far as the great mass of 
shippers is concerned, lies in the measure of publicity given to 
the published rates of the carriers and not in the want of power 
vested in the Commission to enforce its decisions, for if the 
public were to know to just what extent it had been hood- 
winked in the matter of freight charges there would be no 
force on earth that could stop them from securing legislation 



OF SHlPPliNG 17 

which would empower some authority to readjust rates when 
it could be shown that they work an injustice to any shipper 
or any body of shippers. 

The Industrial Traffic Manager is the man who looks 
after the shipper's interests. Created by the Interstate Com- 
merce Act, nurtured by the necessities of business, he has 
grown to full stature and is now an important factor in modern 
business building through his ability to secure profits — 
decrease expense and increase revenue — by the study of the 
freight question as it affects the shipping interests of the 
country. He does not secure rebates. It would be foolish to 
entrust that duty to him, as it would put a powerful club in his 
hands without giving any hold on him as an accomplice. He 
does, however, study railroad methods of meeting the con- 
.ditions which have faced them since the passage of the Inter- 
state Commerce Act, and if, in doing so, he secures profit for 
his employer through the application of rates which were not 
intended to be applied to his traffic, but were designed for 
special traffic, he has full warrant of the law for so doing, and 
is amply justified. 

He knows how to classify goods to secure the lowest rates; 
he knows when it is necessary to route shipments in order to 
protect the lowest rates; he understands the method of rail- 
roads in handling claims and in consequence is able to collect 
more claims than the average shipper. He knows when the 
classificationof a product works an injustice to the shipper and 
to whom to make an appeal and how to make that appeal to 
secure the desired results; he understands the combinations 
to produce lower freight rates, and he knows when it is possible 
to secure lower rates or special concession on large shipments 
and how to proceed for the purpose of securing such concess- 
ions. In short, a Traffic Manager possesses a knowledge 
which produces a profit to his employer over and above what 
is spent upon his salary. If this were not true the demand for 
traffic men would not be increasing out of all proportion to the 
supply, and the keenest business men in the country would not 



18 THE SYSTEMATIC STUDY 

be paying salaries ranging from ^5,000 to ;^25,ooo per year to 
men who are equipped with this knowledge. 

The title of traffic manager has been adopted by shipper 
for the men who have charge of freight departments of their 
business, and in this they have followed the lead of railroads, 
which, since the Interstate Commerce Act has been passed 
have designated by this title the men who study to figure the 
cost for carrying and to issue the prices at which the railroads 
carry the various classes of commodities and merchandise 
which are offered them by the shipping public. 

I In purpose, the shipper's traffic manager and the traffic 
manager of the railroads are engaged in the same work, namely, 
that of producing profit for their employers. Years ago, when 
the Interstate Commerce Act first became a law, there were 
very few men in private service called traffic managers. At 
that time their chief function was to "shop" for lower rates, 
working competing railroads against each other to the end 
that they might secure for the carrying of their freight the lowest 
possible charge. Today a traffic manager has nothing to do 
with the question of rebates, and secures special rates only in 
a legal way, a way that is open to every shipper if he under- 
stands the ropes and knows how to go about it. But the 
position of the traffic manager has grown important owing to 
the complex conditions which have arisen in the rate situation 
since the passage of the Interstate Commerce law. 

Notwithstanding the declaration that there shall be no 
special preferential rates and no rebates, it is nevertheless true 
that the railroads are compelled by the demands of various 
shipping interests to differentiate between those shippers which 
produce large tonnage and those of minor importance. In 
other cases the necessities of the railroad itself for the develop- 
ment of traffic compel the issuance of what are practically 
special rates for the purpose of building up industries along 
the lines of their road. 

Knowing this to be a fact, the traffic manager studies the 
situation that confronts him with relation to the demands of 



OF SHIPPING 19 

the business interests which he represents and takes advan- 
tage of the situation thus created for the production of lower 
rates than would otherwise be applied to his traffic. 

Today every concern that is progressive must have some 
one that is competent to pass upon the railroad rates, for the 
reason that the freight charges affect the original cost of manu- 
factured goods, and the price at which manufacturers and 
merchants can deliver their wares to a large degree determines 
the making of sales and the extension of the territorial limits 
within which they may legitimately sell goods. 

It is strange that this has not been apparent to the great 
body of shippers when you consider that the freight expense 
amounts to lo per cent of the cost of all the manufactured 
goods in the United States; that it is equal to one-half of all 
the money spent on labor connected with the manufacture of 
articles for sale and that it is more than the entire general ex- 
pense. Do you think for a moment that any merchant would 
pay so little attention to any other factor affecting the cost of 
his product which played so important a part, not only in fix- 
ing the original cost, but also in so large a degree affects his 
power to market his products. It is because this has been real- 
ized by a few of the more progressive merchants that they 
have employed traffic experts to study this freight question, 
and as other concerns come into competition with them and 
realize that there must be some material advantage gained 
through such employment, the demand for knowledge upon 
this subject increases. 

What the traffic manager does then is to produce a profit 
for his employer over and above the expense which is attached 
to his position. He makes an intimate study of the character 
of the goods which are shipped, he carefully studies the classi- 
fication of these articles, not only as they are described in the 
general classification, but also as they are described in com- 
modity tariffs, these being special rates affecting the cost for 
transporting the product in which he is interested. In con- 
sultation with the sales manager of the concern he studies to 



20 THE SYSTEMATIC STUDY 

see if it be not possible to extend the territorial limits within 
which goods are sold, and to this end it becomes necessary for 
him to understand what competition is encountered by the 
firm in selling goods. In cases where large sales are likely to 
be the result he frequently finds that the profits resulting from 
such sales will admit of the absorption of differences between 
the freight rates which his concern is paying and that of some 
competitor located at a nearer jobbing or shipping center. 

In other cases where it is not possible to do this and the 
traffic is desirable from a railroad standpoint he makes an en- 
deavor to secure from the railroads special commodity rates to 
enable his concern to sell in territory which is not legitimately 
their own. In this way he increases the selling power of the 
merchant and produces a profit that would not otherwise 
exist. He studies the rulings of various railroads and in 
figuring rates finds combinations which frequently lessen the 
cost of transportation. It is the rule of the traffic manager 
(strange as it may seem) to accept no tariff as an authority 
unless he finds, after careful examination, that it produces the 
lowest rate. This is true both on incoming and outgoing 
freight. It is his duty to furnish instructions to the shipping 
clerk, both as to the way goods should be described and packed 
and, in special cases, as to how they should be routed. 

One of the important items in selling goods at the present 
time is the quick delivery of shipments, and he makes it his 
business to become familiar with the time taken by railroads to 
deliver shipments from his factory to the various territories to 
which goods are consigned. If his shipments are unreasonably 
delayed from one cause or another, he devises a tracing system 
which will tend to produce quicker delivery. This may seem 
unimportant, but with the large concerns it is a very important 
item indeed. Some concerns, through lack of system of this 
character, lose every year in the various goods which are sold 
for charges sums ranging from ^5,000 upwards. 

The traffic manager's peculiar knowledge of the methods 
which are employed by railroads in handling freight enables 



Ol SHIPPING 21 

him to handle loss and damage claims expeditiously, and in 
order that he may collect the maximum amount of claims of 
this character with the minimum of expenditure he must have 
this knowledge, and in addition must understand the laws 
which affect common carriers, fixing their liability for loss and 
damage in the transportation of freight. The same knowledge 
of the methods in vogue among railroads in handling over- 
charges is largely productive of profit. He knows just what is 
necessary to enforce the collection of a claim for an over- 
charge, he knows what papers to send, to whom to send them 
and is wise enough (if he be wise at all) to make a reputation 
for sending no claims which have not a just and reasonable 
basis for presentation. In other words, a traffic manager is 
really a legal traffic specialist looking after the interests which 
he represents, to see that their business is conducted in the 
most economical and satisfactory manner. 

All this service of the traffic manager is made possible by 
the Interstate Commerce Act. It is made necessary by the 
attitude of the railroads toward that act and the system which 
they have put in force to meet the various conditions which 
confront them in the handling of traffic. These conditions, 
which in many cases result in the production of a lower cost 
for transportation, are thoroughly covered in the course of 
instructions of the School of Interstate Commerce. 



22 QUIZZES ON SYSTEMATIC 

1. How does the cost of transportation compare with 
other public expenses ? 

2. Discuss the estimated number of tariffs and their 
effect on overcharges ? 

3. Why are the railroads not blameworthy for many of the 
overcharges ? What is the shipper's duty in respect to secur- 
ing lowest rates ? 

4. What responsibility did the passage of the Interstate 
Commerce Act place on the shipper in respect to tariffs ? 

5. What are the three most important reasons for over- 
charges ? 

6. What can you say of the number of major classifications 
of goods ? Can commodity tariffs be used by all shippers ? 

7. How do the railroad rate clerks bill shipments ? Why 
are they liable to bill overcharges ? 

8. What opportunity to save money did the passage of 
the publicity clause of the Interstate Commerce Act give all 
shippers ? 

9. What fundamental condition will always exist which 
will make it possible for shippers who make the effort to secure 
the same rates as their competitors ? 

10. What clause in the Interstate Commerce law makes it 
possible for all shippers to receive the same rate ? 

11. How may a shipper organize his Traffic Department 
so that he will obtain the lowest freight charges ? 

12. How do the duties of the Traffic Manager for the 
shipper differ from those for the railroad ? 

13. How do some shippers secure advantages over others 
without rebates or violating the letter of the law ? 

14. What is the vital weakness of the Interstate Commerce 
Act? 

15. Why is the Traffic Manager a profitable man to each 
large shipper and what are his chief duties ? 



STUDY OF SHIPPING 23 

1 6. What industrial conditions have created the position 
of Traffic Manager and how do his duties differ from what 
they were a few years ago r 

17. The freight charges on most articles equal about 
ten per cent of the cost of production. Why have shippers 
given so little attention to this matter ? 

18. How does the Traffic Manager co-operate with the 
Sales Manager to build business and extend the market for 
their goods ? 

19. How does the Traffic Manager speed up shipments 
and handle cases where goods are lost in transit ? 

20. How does he collect claims promptly and secure many 
favors which the shipper would not otherwise enjoy ? 



■ r.opr nsi TO CAT o^v 

NOV 13 11909 



LIBRARY OF CONGRESS 

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